Q1 2020 Earnings Call

Please standby we're about to begin.

Ladies and gentlemen, good day and thank you all for joining us for this Fortuna silver mines first quarter 2024, natural called an operational results. As a reminder, all phone participants will remain in a listen only mode and today's session is being recorded to get started with opening remarks and introductions I'm pleased to yield the floor to mr.

Carlos Baca with Investor Relations manager.

Sure.

Thank you very much good morning, ladies and gentlemen, I would like to welcome you to Fortuna silver mines into our financial and operational results called for the first quarter 2020.

Today, we will be using a webcast presentation, which will be controlled BYOD, who don't know the presentation. He's going to war website at www Fortuna Silver Dot Com peak on the investors tab, then click on the financial soaked up in under Q1 2020 click on the earnings.

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Okay. That's all I know, it's how prescient CEO and director and degrees ideal God knows how see Oh, we'll be hosting the call from their home offices in Lima, Peru.

Before I turn over the Colts important here.

I'd like to indicate that these earnings call contains forward looking information that is based on the company's current expectations estimates and believe.

These forward looking information is subject to a number of risks uncertainties and other factors actual results could differ materially from my conclusion forecast or projection in the forward looking information certain material factors or assumptions were applied in drawing a conclusion or making a forecast.

Our projection as reflected in the forward looking information additional information about the material factors that could cause actual results to differ materially from the conclusion forecast or projection in the forward looking information and the bacterial factor or assumptions that were applied.

Drawing a conclusion or making a forecast or projection as reflected in the forward looking information is contained in the companys annual information form and M.D., an eight which are publicly available on SEDAR.

The company assumes no obligation.

To update such forward looking information in the future except as required by law.

In addition, as Fortuna is indeed a.

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My next month will not be taking any questions during or after the call to date.

I would now like to turned their coal over two quarters <unk> medical I know, so prescient CEO and cofounder all for doing huh.

Thank you Carlos and a good morning tool a week presenting them introduction for first quarter results at least cost actions thinking doing these more months so.

I'm presuming that there's uncertainty, we're leaving and then turn the call over to Luis will take you through the financial state.

On slide six.

Inpatient.

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We'll give you that second so we can move there.

On slide six of the presentation.

In the water, we boarded strong free cash flow worked in medium.

And you'd be the margin of 34%.

Below or targeted 40 person margin.

Oral well results were negatively impacted.

Lower gold and silver production and sales against a comparable period a year budget.

You see the result of mining from lower grade Saum said this cycle sand mine.

No silver and byproduct.

Metal prices.

We will provide more detail on these during the presentation.

The company that's taken actions by the thing and I think with level of liquidity going theater in decent certain times of the capital demands. So we're pretty excited like.

So the end of March we reported 88 and a half meeting in cash.

Announced a 60 million equity financing plans for $23 million. He brings 20 topics I don't think she's options.

Those amendments to financial Covenant seen are great succeed.

As of March 19.

The date of the demobilization determined at three isolation theories Argentina.

Are you did a broad use 94% complete.

Remaining funding to commercial operations, he 75 to 80 million.

Or construction operations groups are mommy lysine back inside there would be second half with me.

We expect to be up and running at full speed under a new construction commissioning plan by the end of the month.

[noise] considering all the garbage related you need somebody would patients. We're now planning to lean commercial operations in Q1, two any twin.

[noise] over the past month, they called the Sunday me.

Or generation to an unprecedented pest.

During these types of extreme uncertainty, we're actually I'm sad for doing that are being guided by three greenshoe.

Support of local government actions.

See steel for personnel are neighboring communities.

And business continuity.

We have withdrawn or 2020 production guidance.

Got you up on mine that's managed to operate all these fine.

But our lean Dado project and San Jose mine were halted or March 19.

April 2nd perspective.

During the second half of me, where mobileye preparing to receive activities at both units.

In early May we published or 2019 sustainability report.

These report fees, a more comprehensive and significant improvement already agreed easier publication.

We're leasing indoor stakeholders and working blends right that it non res nor any industry by a rapidly changing world.

I invite you to read the document and provide comments.

Moving onto slide seven.

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In slide seven we shared with you or key safety performance indicators.

We present the gate access adult month, rolling average to better address and trends and as you can appreciate we are delivering solid and consistent improvement year over year.

We still have a lot to improve on I'm not conveniently learning for more mistakes.

Got a cultural change has been set in motion you know organization I need it shows would there be sold.

Slide eight.

[laughter] in slide eight.

Our Q1 production for both Ah.

Gold and silver was negatively affected by lower grade on slightly lower tonnage throughput there were San Jose mine in Mexico.

Sample set production in the quarter deviated from the annual plan to accommodate two initiatives.

Beeler recovery enough I know this for long hole stoping.

These changes to the plant in Berardi sports mining into high risk areas from that perspective, a great pretty upbeat <unk> and mining dilution.

Leading to lower grade seem to order.

This issue has been addressed them correctly late Q1, I know that we have withdrawn plenty to any guidance. We plan for grades. We line. We did they said assumption so for 2020 guidance for the remainder of the year.

For the second quarter last year, we expect a significant drop in silver and gold production. That's every soaked in the Mexican garbage response line, which mandated an industry wide stumpage, which I'd be San Jose mine came into effect on April six.

Based on the recently published government guideline mining has been included in the lease up essentially industry and these expected to resume operations either on May 18 or June 1st.

They they for each operation will depend on the Gorman regional assessment of the virus contagion at this moment. The government has not provided any further guidance.

Slide nine.

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Silver accounted.

For these 2% of sale.

On gold for 29%.

For a combined 81% leashes methods contribution.

Silver price, what's a wrong or cost during the quarter.

We realized an average right so $16.30 or else.

[laughter] for silver about price at the end of Q1 close that are slightly below $40, a $13 and nineties.

Silver spot price do they do well versus back around 69 or have a dog ours.

Well continues to show a steadfast for four months prices today trying to build a.

So he basically.

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Slide 10.

Well give it I mean for this indication too.

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I'm, there's like Dan.

Compared to a year ago sales dropped by 11 and a half million.

[noise] negatively impacted by the previously described lower metal production.

Lower by broad base metal prices on commercial terms were constant.

Core EBITA, what's he primarily by the lower sales.

The adjusted net loss was deep and by 92.6 million.

Income tax provision necessary something that evaluation of the Mexican peso.

And a 1.2 million deviated, we Toby ducks.

Slide 11.

[noise], south wholesaling sustaining cost, but driven higher by lower metal production.

But on a cost per ton basis, we were in line with their budget, but $71 football.

Hi, Youre not all in sustaining cost what driven higher by lower seeing unless prices, which were down 20% I made percent respectively.

[laughter] cost on the birds on basically in line with your budgets approximately 80 dogs.

Sure, we're still waiting for that slide two outflows I don't know.

Everybody sees the same slide into person.

I'll move on to slide 12.

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Moving on to slide well in the order we reported consolidated capital expenditures. So when you see sports seeks medium to both of these of course, we made it would be better freight cost structure.

And then commissioning activities.

Hey, accounting for 21.4 meeting.

On slide 13, Lucas indication.

We sure or probably pipeline.

Here I can highlight once again to render them. So for today, we're probably were no cost copper looks from gross.

On slide 14 on that presentation.

On may eight we'd be semi navy that comprehensive news release updating the market on our plans to resume construction activities that you can do.

Okay.

[noise], we also provided guidance on our revised construction and commissioning timelines, which take into consideration gabi related restrictions and the mutation.

The construction workforce is what we liked him back to site you pick on top of me, we plan to initiate or stuck in the leach pad in July.

Game publishing first gold as part of the commissioning and ramp up say starting in September and going until December.

Spirit gold they production. He said you made it in the range was 25000 28000 jobs.

On slide 15.

But boy completion stands at 94% as of March 19.

The date it breed demobilization took place.

We're working to huh.

Our full construction workforce operational on side, but early June.

For the start of commissioning and initial ramp up we plan to bypass the tertiary H.B. York rushing to within agglomeration.

This means we will be placing secondary crushing or on the leach, but until November when did tertiary crushing circuit is scheduled to come on line.

The objective of these bypass plan is to remove the reason to initial production of commissioned H.B. here and there are tight time line without onsite vendors board.

This plan will also allow to reduce barley like TV, allowing a better concentration of resources.

On completion and commission or solution handling easy our I'm sorry.

Oh remaining brought are you finding requirements for Gigoptix.

We grew up action working capital and be a D them that 75 to 80 million.

Following we have a a few weeks so.

The recent features.

From our construction.

In my computer here the presentation has frozen.

One of their lease lights.

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So I don't know that's the case for everybody, but I do the whole JC buddies.

The case, it but I will now during the.

The presentation to Louise.

Can provide a you would further details on our financial results.

Thank you Holly.

Well I'll make reference to slide 20, you know the webcast.

That's what it has described sales were impacted mainly by lower production at San Jose Sharp drop in base metal prices.

Friedman and refining charges.

On water and to replace adjustment.

Compared to the first quarter 2019 sales fell 11.5 billion dollar.

The net loss of $4.5 million I'd be adjusted net loss of $2.2 million are the result of making sales combined with an unusually high income tax provision for the theory.

Free cash flow from ongoing operations for water was $14.2 million strong increase over that same quarter in 2019.

The increase was due primarily to positive changes in working capital of $9.5 million compared to negative changes in the <unk>. The first quarter all 2019.

As well as lower capital expenditures in 2020.

And next slide slide.

When you won.

As mentioned before the main component of the drop in sales was lower precious metal production in particular, a the effect of gold at San Jose.

When they got itself the Jasmine.

Oh $2.8 million correspond to the drop in Denver think lead prices at the end of March which when combined with a positive right the effect of $1 million.

The salt in a negative impact for metal prices, so $1.8 million the negative impact of Beekman, then be finding charges reflects a deterioration of commercial terms for saying, let's concentrate in 2020.

[noise] onto next slide slide 22.

Our adjusted operating income was 5.5 million bonded.

Yeah. So from lower sales was mitigated by lower Gionee up $2.9 million enough foreign exchange gain on an adjusted basis, so $1.9 million.

This is after adjusting for a 3.2 million dollar loss related to that evaluation on arginine pencil.

The detail of these adjustments are shown on the appendix section.

Slide 29 of the went up.

That's a.

Separate note. We also recorded in the quarter $1.1 million. So I think that they saw denominated investment gains, which partially offset the negative impact that does evaluation of a pencil continues to have on our be 80 receivables doubling NATO project.

[noise] gosh costs, both San Jose on to your my were mostly within similar levels I think 2019.

The following any Dod both abrasions was mainly a result with Lilly scale.

This effect was more pronounced that youre, not which recorded a sharper drop in EBITDA associated with a larger fall in sales when compared to 2019.

Onto slide 23.

Well, what a DNA was.

We point $6 million, which was $2.9 million below 2019.

Your name for corporate and then subsidiaries taken together what are your about $3 million lower.

Then Q1 2019, well the main reduction came from a credit in share based payment of $1.4 million showing the table.

Third to a charge of $1.3 million in 2019.

Our effective tax rate in the quarter reflect.

They didn't but that's what I can mention those out evaluation of a Mexican peso large extent disinfect isn't that different components of the income tax provision as we know under <unk> forensic a nation of the income tax.

Subject to the volatility of foreign exchange.

We estimate this affected the around $2.6 million recently, there was a onetime charge in the quarter related to one point $25 million Oh withholding tax.

[noise] onto next slides legend before.

You're also as mentioned by Jorge we have taken measures to strengthen our balance sheet preserving liquidity and address the impact that suspension of operations at San Jose on our financial I'm, calling them.

We expect these budget reduction so well million dollars topic, some brownfields exploration.

And the $11 million operating in corporate expenses.

We'll be constantly we had said over the coming month of the older old situation related to that and then in commodity prices as well.

Our cash liquidity position I'd be another quarter was 88.5 million Bucks.

Thank you and back to do Carlos.

Yes.

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As noted at the beginning of the call for Tonight, you seem to meet a public offering up in securities.

Accordingly management will not be taking any questions today I would like to thank everyone for listening to todays earnings call and we look forward to you joining us next quarter.

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